T-Mobile Not Stealing Customers… Yet

Are T-Mobile's "uncarrier" ways helping it steal customers from its competitors? If you follow the boisterous claims of its CEO, you'd think US consumers are chomping at the bit to tear up their contracts and join the magenta movement. But the numbers suggest that's not the case, or at least not yet.

According to the latest consensus estimates for wireless subscriber growth, which T-Mobile US Inc. provided to industry financial analyst Craig Moffett as part of its quarterly survey of sell-side estimates, the industry as a whole gained 800,000 postpaid customers in the past three months.

So where are these nearly one million customers coming from? For now, some could be from the smaller operators, upgrading to a smartphone and a tier-one provider for the first time. Others are likely tablet subscriptions or other non-mobile postpaid users. But, increasingly, these customers have to be coming from other big carriers, which means additions can't stay that high for long.

In fact, I'm surprised they have so far. The level of promotions in the wireless industry has to be at an all-time high. In the past week alone, Verizon Wireless dropped prices on its More Everything plans to match AT&T Inc. (NYSE: T)'s offer of four lines and 10GB of data for $40 per line per month, and today it's offering up 1GB of free data to tablet customers on the plan. (See AT&T Joins Verizon in the Shared Data Pool.)

That said, it hasn't yet erupted into an all-out price war. While the operators have tweaked their offers and repackaged how they price, the actual prices haven't come plummeting down. Their earnings haven't been affected yet either. But going forward, they will likely come at the expense of subscriber growth, if not revenues. (See Verizon's 4G Strength Keeps It Above the Fray.)

Moffett says that consensus expectations for 2014 post-paid net adds have fallen at Verizon from 3.53 million nine months ago to less than 3 million today, and from 1.4 million six months ago at AT&T to 1.2 million today. For Sprint, postpaid subscriber losses in 2014 have more than doubled over the past three months to 617,000. T-Mobile, meanwhile, continues to grow -- from 1.3 million three months ago up to 2.9 million additions expected today. Incredibly, a year ago, T-Mobile's estimates were only for 50,000 postpaid subscriber additions this year. (See T-Mobile Leads, Sprint Suffers in Pricing Wars.)

That growth has to come from somewhere. But as Moffett points out, the estimates have to be off base. He writes, "At Verizon, consensus estimates for churn has ticked up by 2 bps [basis points] over the past three months, AT&Tís has increased 3 bps, Sprintís, 8 bps, and T-Mobileís fell by 4 bps. Street estimates, in other words, seem to imply that the TMUSís subscriber gains are largely coming out of thin air, and that the big fourís recent promotion wars have really only resulted in, well, more customers for everyone."

At some point, that can't last, and it might just take an all-out price war to tip the scales. T-Mobile has made moves in that direction, and Sprint's new boss, SoftBank Corp. CEO Masayoshi Son, has promised one if he's able to acquire the Uncarrier. So far, there's more of price squabble in the US, but as T-Mobile's consensus estimates prove, a lot can change in a very short amount of time.

I guess most importantly (assuming the service has been on par for you), is it a lot cheaper now?

It's significantly cheaper, but more importantly, t-mobile's "unlimited" plans make its bills much more consistent for me. When I was with Verizon, my bills would fluctuate wildly depending on "overage" costs -- if I exceeded my alloted bucket of minutes per month, I'd have to stop using my phone... or pay an extortion-like per-minute rate for my voice calls until the end of my billing period.

T-Mobile stole me away from Verizon Verizon has a lot of factors going for it -- its network reach is hard to beat, so while I was with Verizon, I almost never had no signal or a dropped call. However, VZW's prices are pretty easy to beat, and that's what got me to switch to t-mobile.

So far, I'm not so sure that "uncarrier" means what they say it means. T-mobile has certainly tried to make its customer service not suck like other carriers, but in the end, I don't think it's *that* different from its competitors. It's not like the difference between Tesla and the Big3 automakers. It's more like the difference between a local pizza restaurant and Pizza Hut....

Re: More fun with numbers I have a hard time seeing any changes in wireless subscriber pricing.

We can all sit around and complain about how expensive monthly fees are. But the reality is that we're all going to continue paying those fees.

It's expensive on an infrastructure and operating level for wireless companies to do all of this while making a profit. Actually, I think companies like Verizon make a whole lot more on the business side than anything else.

Ultimately, I like how T-Mobile is trying to positiion itself as a consumer friend in the industry. But I have a hard time seeing how the company will actually cause long-term distruption or change for consumers. It's the same product just packaged slightly different.

Re: Ups n Downs The numbers aren't always going to add up when company PR folks put out their version of how great they're doing. But, it's still hard to keep customers satisfied and ironically sometimes hard to get them to jump ship to another company, adding to the difficultiy of predicting customer behavior and thus indivitual company profits.

Clarification from Craig... Moffett was in touch to clarify that he believes the estimates what is off base. He writes:

"The point we were making is that the estimates reflected in T-Mobile's survey are probably simply wrong; they have come up for T-Mo but have not yet come down for everyone else, and are therefore likely much too optimistic for the industry as a whole...We meant that other forecasters aren't yet reflecting that T-Mobile IS taking subscribers, and that their forecasts are therefore simply wrong. Similarly, we didn't mean that churn hasn't gone up for everyone else, as you suggest. We meant that forecasts don't yet reflect the fact that churn has undoubtedly gone up, and, again, are therefore simply wrong."

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